After reading yesterday morning’s discussion “Deficit Hawks Want New (or double dip) Recession,” a friend emails the following:
“Let’s say I buy your argument that expenditures beyond annual government income during recessions and the immediate aftermath is preferred to cutting the deficit. OK, smart guy, where would you spend the money?”
I believe that policy makers need to address two issues — and do so while individuals and banks deleverage — meaning, no more leverage or individual debt:
These issues are unemployment, and the related demand destruction the recession caused.
How to fix that?
There are many suggestions, but I would go with:
1) Payroll Tax Holiday: Over the Summer months (June, July and August) — no employer or employee taxes need to be paid. That would amount to an immediate surge of spending cash (with no additional individual debt), especially amongst the poor and middle class.
2) Public Works programs — Rebuild the US infrastructure — Airport terminals, Shipping Port Security, Highways, National parks — all of these not only create jobs, but leave something worthwhile after the fact.
Any other ideas? Use comments to discuss
For those of you who are convinced the worst is behind us, I’ll see you at the next recession . . .